There’s a bit of panic in Silicon Valley these days. Tech companies from Meta/Facebook to Amazon to Twitter have announce large-scale layoffs–in some cases, for the first time in their history. Crypto is in freefall, with FTX declaring bankruptcy this past week.

Many younger members of the work force haven’t experienced a downturn like this, so it’s no surprise they’re alarmed. But those of us who have been around the block a few times understand that it’s called a business cycle, because nothing goes up for ever. What goes up has to eventually come back down.

But the word also cycle implies that we don’t stay stuck in the dumps forever, either. Downturns are a natural way to weed out those players that have expanded too quickly, or, like FTX, were built on an unsustainable value proposition.

I remember at one time Starbucks was adding locations so fast that there were literally Starbucks across the street from other Starbucks. The joke was there soon would be new Starbucks opening up inside the back of existing stores. Instead, they hit the brakes, retooled, and refocused on where they could be profitable–instead of focusing on growth as the only metric that mattered.

Once this downturn is over, we’ll still have Amazon and Facebook (though we may not all be in the Metaverse). Those companies that understand who their customers are and can show the value they provide will survive as stronger, albeit perhaps smaller, versions of themselves.

It’s the way the world works. I’ll bet a Grande Cappuccino on that.

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linda@popky.com
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